Lazy portfolio for cheap investing - Michael Smeriglio

Why I’m a lazy, passive-aggressive, cheap investor

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I normally never use the term “lazy” to describe myself, but in this instance I’ll make an exception.

You may think, to get anywhere with your money, you have to roll up your sleeves, consult with the experts and take on a mountain of work. Indeed, much of the financial industry may try to convince you that with complexity come better returns.

But in my experience, complexity is not only expensive, it can be inefficient and comes with no guarantees. Putting together a perfect set-it-and-forget-it portfolio has served me well over the last two decades, and here’s why.

The ‘lazy like a fox’ portfolio

My sharpest tool as a long-term investor is what is commonly known as a lazy portfolio, and it’s a great way for regular people to efficiently grow their assets, easily diversify away unsystematic risk and pay the lowest fees to do it. I think it’s “foxy” for several reasons.

1. It’s easy to understand.

When I was just getting started as an investor, it was important to me to understand what I was buying and why so that I could stick with a plan. A lazy portfolio allows you to clearly allocate your investments between stocks and bonds and even fine-tune a percentage for international investment — all with fewer funds than fingers on one hand.

2. A lazy portfolio practically manages itself.

The term lazy doesn’t refer to lackluster returns, but rather to you as the investor. I’ve found that maintaining an asset allocation with just a few mutual funds can take less than an hour of attention per year. I rebalance annually by selling off a little of my highest performers and add to my slower performers — maintaining my predetermined proportions of each fund.

3. I avoid the pitfalls of my flawed, emotional human brain.

We all think we’re smarter than the average bear, but Nobel Prize-winning economist Daniel Kahneman has proved this isn’t the case when it comes to investing. The field of behavioral finance has shown that our inability to time the market in pursuit of higher-than-average returns has cost us dearly. Going lazy with your investments leads to fewer emotional decisions based on short-term movements in the market.

Ending up with more as a cheap investor

You won’t be surprised to find out that the MBAs running actively managed mutual funds do not work for peanuts, and neither do commission-based investment advisors who design portfolios that contain those active funds. But these are often the people we look to for guidance with our money, and their advice comes at a premium.

The good news is that when you give up the expensive dream of beating the odds to embrace the market average, investing can be very cheap. For example, doesn’t it sound better to track the average performance and pay as little as 0.05 percent in annual fees rather than occasionally beating the market by 1 percent only to pay 1.5 percent in fees? When you’re paying high fees, you not only need to beat the market, you’ve got to really beat the market every year, and that simply isn’t realistic.


Mike Smeriglio III is a financial specialist. A licensed CPA since 1985, Mike has been providing tax preparation services to individuals and businesses for more than 30 years through his firm located in Greenwich, CT.